Advanced financial accounting - Lecture 44. The main topics covered in this chapter include: income statement; cost of investment; ordinary share capital; less impairment of owner’s equity; opening balance of group retained profit; less goodwill amortization;... Please refer to the lecture for details!
Advanced Financial Accounting Lec-44 Main Ahmad Farhan Solution Income Statement For the year ended 2000 Rs Rs Sales 7,500 4,000 Less Cost of goods sold 4,500 2,900 Gross profit 3,000 1,100 Less Operating expenses 1,800 600 Operating profit 1,200 500 100 - 1,300 500 Less Income tax 520 200 Net profit after tax 780 300 Less Ordinary dividend paid 250 125 Net profit after dividend payment 530 175 1,000 450 Add Dividend income Net profit before tax Add Opening retained profit Question The Parent Co acquired 80% equity of Subsidiary Co on 1st Jan 2003 for Rs 1,700 when S paid share capital was Rs 1,250 and it’s reserves were worth Rs 50 During the year S sold to P goods costing Rs 1,000 and selling price Rs 1,250 Total goodwill has been impaired so-far Required: Prepare the consolidated Income Statement for the year ended for 31-12-2008 Working Holding % = 80% Minority % = 20% Working (Goodwill) Cost of investment Ordinary share capital of S (1,250+50 x 80%) Goodwill Less Impairment of owner’s equity 1,700 1,040 660 660 Working (Opening Balance of Group Retained Profit) Opening balance of retained profit of P Co Post-acquisition part of opening retained of S Co to the extent of holding % (450-50)x80% Less Goodwill Amortization Closing balance 1,000 320 1,320 660 660 Working Minority Interest Profit after tax of Subsidiary Co x Minority interest 300 x 20% = 60 Working Consolidated Sales Sales of parent Co Add Sales of subsidiary Co Less Sales made by subsidiary Co Consolidated sales 7,500 4,000 1,250 10,250 Working Cost of Goods Sold Cost of goods sold of parent Co Less Increase in purchase of parent Co Add Unrealized profit Add Cost of goods sold of subsidiary Co 4,500 1,250 40 2,900 6,190 Solution Consolidated Income Statement For the year ended 31st Dec 2000 Sales Less Cost of goods sold Gross profit Less Operating expenses Operating profit Less Income tax Net profit after tax Less Minority interest Less Dividend paid Opening balance group retained profit Closing balance group retained profit 10,250 6,150 4,100 2,400 1,700 720 980 52 928 250 670 660 1,330 Question Income Statement For the year ended 2008 Rs Rs Sales 900 600 Less Cost of goods sold 400 360 Gross profit 500 240 Less Operating expenses 200 48 Less Selling & distribution expenses 100 36 Operating profit 200 156 Less Income tax 90 72 110 84 Net profit after tax Question The Parent Co acquired 100% equity of Subsidiary Co on 30 Sep 2008 Required: Prepare the consolidated Income Statement for the year ended for 31-12-2008 Solution Consolidated Income Statement For the year ended 31st Dec 2000 Sales Less Cost of goods sold Gross profit Less Operating expenses Less Selling & distribution expenses Operating profit Less Income tax Net profit after tax Rs 9M 450 270 180 36 27 117 54 63 Rs 3M 150 90 60 12 39 18 21 Working Sales 600 x 9/12 = 450 600 x 3/12 = 150 Cost of goods sold 360 x 9/12 = 270 360 x 3/12 = 90 Operating expenses 48 x 9/12 = 36 48 x 3/12 = 12 Selling & distribution expenses 36 x 9/12 = 27 36 x 3/12 = Income tax 72 x 9/12 = 54 72 x 3/12 = 18 Solution Consolidated Income Statement For the year ended 31st Dec 2000 Rs Sales (900 + 150) Less Cost of goods sold (400+90) Gross profit Less Operating expenses (200+12) 1,050 490 560 212 Less Selling & distribution expenses (100+9) 109 Operating profit Less Income tax (90+18) Net profit after tax 239 108 131 ... selling price Rs 1,250 Total goodwill has been impaired so-far Required: Prepare the consolidated Income Statement for the year ended for 3 1-1 2-2 008 Working Holding % = 80% Minority % = 20% Working... Retained Profit) Opening balance of retained profit of P Co Post-acquisition part of opening retained of S Co to the extent of holding % (45 0-5 0)x80% Less Goodwill Amortization Closing balance 1,000... Co on 30 Sep 2008 Required: Prepare the consolidated Income Statement for the year ended for 3 1-1 2-2 008 Solution Consolidated Income Statement For the year ended 31st Dec 2000 Sales Less Cost